Not all renovations add the same value to your home. Here’s our look at what renovations give the best return as well as when you should do them.
An important caveat is that there is considerable disagreement as to exactly how much value a renovation adds to a home. There is no shortage of stories in the media that report percentages and dollar values as facts rather than opinion. We’ve looked for consensus from different sources and also applied our own experience helping clients buy and sell to come up with some guidelines for your renovation plans.
Let’s get started.
It’s what is on the inside that matters.
Royal LePage conducted a survey of 750 agents in 2018 and one of the results was a consensus that exterior projects like adding a pool or deck are the least likely to increase a property’s value. We know from our work with clients that pools are not a good investment. If you buy a home with a pool, you often don’t have to pay a premium for the pool compared to a property without one. Considering a pool can cost between $60K to $80K, if you want one in your home you should definitely make sure you buy one with one in place rather than build one yourself.
Cooking before Bathing
The same survey found that a kitchen renovation has the potential to increase the value of a home by over 12.5%, compared to a bathroom renovation, which ranges from 2.5% to 12.5%. While we all enjoy a lovely bathroom, with open concept homes more and more common, a new kitchen is a constant visible feature you will appreciate far more often. The survey uses percentage increase in the value of the home as a whole, which is an interesting approach. It means that you’ll need to consider how much you spend on a project related to the overall value of the home. Spending $10K on a bathroom remodel in a $400K home might not be the smartest investment. Many other surveys look at the return on the cost of the investment itself – i.e. if you spend $23K on a kitchen, you might get a 77% return on that investment, adding $18K in value to the home. If that number seems specific, it’s because it is pulled directly from the 2020 Cost to Value Report from Remodeling, a US-based website and magazine.
Curb appeal still matters.
Despite the Royal LePage agents saying you should focus on the inside, the Remodeling Cost to Value report shows that the two highest return projects are exterior projects, namely adding manufactured stone veneer to your house or replacing your garage door.
Global News consulted some real estate professionals, which we assume is code for Realtors, to come up with their five low-cost renovations that have the highest return on investment and two of the five suggestions are exterior improvements.
Image courtesy of Global News
As mentioned, take the numbers and percentage returns above with a grain of salt. It looks very official when it is presented this way, but the numbers are a result of a real estate agent saying something like “Oh, for sure, you could get ten or even fifteen thousand more for your house if the front was landscaped nicely.”
It’s almost Christmas..better start that reno.
In terms of timing, the month of November is considered to be the best time to get the best prices on a renovation. The reason is pretty simple – supply and demand.
Contractors are often busiest in the spring and summer months, particularly if any of the renovations require work outside. As we head into fall and colder temperatures, work continues but there are often deadlines to complete projects before the holidays. Most projects that start in the latter half of the year have mid-November as a deadline so that the homeowners can prepare for the holiday season without the stress and activity of a renovation taking place.
If you are comfortable with the idea that you’re not going to host much of a Christmas gathering or New Year’s Eve party, you can find contractors who are happy to be working rather than sitting around waiting for the new year. A lack of projects can mean that the best contractors are more readily available, and you have a greater chance of being able to negotiate a discount.
The ideal project for this time is one that can be done comfortably in a month or so. Contractors are working against the holiday deadline and as such things often go quicker than if they had the option of delaying your work to handle a few other small jobs.
As a bonus, retailers often run sales on end of season appliances as they make space for the new models coming next year. Considering such appliances are often the largest purchase (outside of materials and labour) in a renovation, saving a few percent can really add up.
The worst time to renovate?
Finally, let’s talk about when is the worst time to do a renovation. It isn’t a particular month or time of year – it’s right before you move.
If you’ve ever renovated a home right before selling it, you understand this point immediately. There is nothing quite like finally addressing something that has bothered you for years, only to get only a very short time to enjoy it.
Choosing to do a renovation a year before you move rather than a month before you move gives you more time to enjoy the finished product, which has some value in it’s own right. It will likely still be in good shape and not dated when you go to sell and we’ve never encounter a buyer client who demanded to know exactly when the recently updated kitchen was renovated.
In terms of what renovation not to do, we’d suggest avoiding combining open concept with your bathroom. Open and airy isn’t always the best way to go.
If you’re considering selling (or as we say in our last point above, not considering selling just now) and want to discuss which renovations will best improve your home’s appeal and sale price, get in touch.